"Purchasing a property is a
daunting task even when you do so in a familiar enviroment,
so when you come to purchase in a foreign country the doubts
and worries are ten fold. We have created a simple guide to
the main FAQ´s that you would need answering when entering
into a property purchase"
THE CONTRACT
Once you have decided on a property, a contract will have to
be drafted and you need to make provisions for the deposit.
The standard deposit is 10% of the purchase price. The
deposit is payable upon signing a Purchase/sale Contract or
an Option Contract (Contrato de Compraventa o Opción de
Compra), which will include a completion date and
transaction conditions which usually contains an assurance
by the vendors that the property is sold free of charges,
tenants and mortgages. We strongly recommend that
independent legal advice is sought with the drafting of the
Option Contract or Purchase/sale contract.
Once both parties have signed this contract and the deposit
has been paid, you have secured the property. This is a
binding contract for both sides with penalties for breaking
it or for failing to honour the terms of the contract.
PAYMENT AND SIGNING OF DEEDS:
The next stage is to complete the purchase at the Notary’s
office. Usually, within a month or so, you will be ready to
make the final checks before signing the Title Deed (Escritura
Pública de Compraventa) in the presence of a Spanish Notary
(Notario) who certifies that the contract is officially
made. The notary does not certify that all statements are
true, only that the parties have sworn to them. There you
will be required to pay the balance of the purchase money,
taxes and Notary’s fees.
NOTARY CHARGES:
These are collected by the Notary for preparing the deed and
presiding of its signing. His fees are fixed by law and are
based according to the value of the property.
Please note that all professional fees including the
notary’s and land registry charges are subject to 16% VAT.
PROPERTY REGISTRATION FEES:
Registration fees are charged by the Land Registry Office to
inscribe the new deed into your name. These are based on the
official registered value of the property. The length and
complexity of the deed and other factors are also
considered. The fees do not exceed 1% of the registered
value. It is not advisable to try and do this yourself
unless you are experienced and speak Spanish fluently.
TAXES: (PROPERTY TRANSFER TAX
OR IGIC (VAT)
The property transfer tax is levied on resale properties.
The General rate for this tax is 6% but in some regions,
such as the Balearic Islands, Cataluña and Valencia, etc.
the rate is established at 7%. This should be verified
beforehand.
If you purchase a newly built property from a developer you
will pay a different tax called “I.V.A.” (VAT) which is
charged at 7% of the purchase price plus 0,5% stamp duty.
LOCAL MUNICIPAL TAX (PLUSVALÍA):
This tax is based on an officially assessed increase in the
value of the land since the last time the property was sold
. This can be quite small if purchasing an apartment, but
expensive on a villa with a large plot, which has not
changed hands for years. Find out the exact amount from the
Town Hall. Do not confuse this tax with the vendor’s capital
gains tax on his profit on the sale.
In accordance
with Spanish law, the purchaser is responsible for transfer
tax or (I.V.A. + stamp duty when buying from a developer),
plus Registration Fees and Notary’s Fees.
OUTSTANDING DEBTS:
If there are any debts, outstanding mortgages, unpaid
Community fees etc, then you should make sure that the debts
are paid by the vendor before paying him the purchase price
and signing the Deed of Purchase/sale, or you can deduct the
amounts owed by the vendor from the purchase price to be
paid and settle the debts on his behalf. This should be
agreed between the parties.
WITHHOLDING TAX:
If you buy a property from a non-resident person or a
company, you must withhold a 3% of the value declared on the
deed and pay that amount to the Spanish Treasury (Tesoro
Público). The Spanish Treasury makes it the purchaser’s
responsibility that this amount (3% retention of the
purchase price) is paid to the Tax Authority on account of
any Capital Gains tax generated by the vendor with the sale.
Supplied Courtesy of AMLA Spain
E-mail:
info@tpbs.es
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